econ 4.18 - Income elasticity of property tax less than...

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4/18/2008 Tax Instrument (All taxes don’t work efficiently in the small community) Base Rate Structure Evaluate in terms of Incidence Excess Burden Avoidability Income Elasticity Who pays the property tax? Depends -Netzer’s regressive: Person who owns the property, how is it regressive? Because in short run, it causes capital flight pushing price up. Larger share of lower income person, it makes regressive. -Aaron’s progressive: property tax is everywhere, when capital leaves jurisdiction, it leaves real estate entirely. It makes rate of return all capital all down, so upper income people pays more Either way, p t capital to leave real estate and causin price to some higher degree. Excess Burden Income elasticity: as the economy grows, tax revenue=tax rate X tax base Do tax base grow as rapidly economy?
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Unformatted text preview: Income elasticity of property tax less than equal to 1 Virtual cycle: If the city is able to develop reputation for an extraordinary school, it increases the demand for a housing to go to top quality school, Tax base go up, tax revenue go up and strengthen community. Local government provide: some transportation, security (police, fire, sanitation, schools, bus drivers) It is consistent. Biggest input? Human capital (Labor intensive) Limited technological change Balmers principle Output/Day Wage/Day Unit Labor Cost of producing these things 2 $100 $50 50%< >50% 3 $150 $50 2 $150 $75 Private Sector VS Public Sector (PICTURE) As the average wage goes up, you increase more wage for public sectors, but the productivity remains the same....
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